Electricity producer and retailer Electrabel has been fined €20 million by the European Commission for acquiring control of another electricity company, Compagnie Nationale du Rhône (CNR), without the prior approval of the Commission. Under the “standstill obligation” in the EU Merger Regulation, concentrations of a European dimension must be notified to the Commission prior to their implementation so that the Commission can determine whether competition in the EEA or any substantial part of it is likely to be significantly impeded.
Electrabel notified the Commission of the acquisition of CNR in March 2008 and the Commission subsequently approved the transaction in April 2008. However, following an investigation into the date on which Electrabel acquired control of CNR, the Commission decided that the de facto acquisition had taken place as far back as December 2003. It was at that date that Electrabel acquired a shareholding of close to 50% in CNR. Due to the fragmentation of the remaining shareholdings, this meant that Electrabel enjoyed a stable majority at shareholder meetings and was the sole industrial shareholder of CNR. Electrabel had also assumed the role in the management of CNR’s plants and the marketing of its products that EDF had relinquished as part of the commitments EDF made to secure the approval of a separate merger.
Together, these elements justified the Commission’s decision that Electrabel was in breach of its duty under Article 4(1) of the EU Merger Regulation to notify the Commission of a concentration prior to its implementation. In assessing the level of the fine, the Commission took into account the seriousness of the infringement and the importance of notification as part of the EU merger control system; the long duration of Electrabel’s infringement and the fact that Electrabel and its parent company GdF Suez are large companies with experience of EU merger control systems. In mitigation, it was taken into account that the transaction did not result in any substantive competition concerns and that Electrabel did eventually notify the Commission. If the transaction had had a negative effect on competition, the Commission stated that the fine would have been considerably higher.
The fine imposed on Electrabel is the first decision under Article 14(2) the EU Merger Regulation which was introduced in 2004. There were only two examples of the Commission making use of its fining powers under the previous legislation, and the fines imposed were relatively small. The Commission’s decision in this case can be seen as reinforcing the importance of complying with the EU merger regime.